This is clearly evident, says Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s biggest bond originator, in the latest statistics from First National Bank which show that 88% of sellers have to drop their asking price in order to achieve a sale.
“And the average drop is around 7%, which means that the majority of sellers are undoubtedly out of step with what buyers are actually willing or able to pay.”
He says sellers often argue that prospective buyers can always make lower offers if they don’t like the price - but the fact is that serious buyers will usually not make any offer at all on a home they consider to be overpriced, especially if the market favours buyers as it does at the moment and there are many alternatives for them to choose from.
“A few may shy away from making a lower offer because they don’t want to offend the seller, but most will just walk away from the prospect of a lengthy and stressful negotiation, even if they like the look of the property.”
Sellers also often say that if a buyer loves their home enough, he or she will happily pay a premium for it. “But the fact is that very few buyers, if any, are ever willing to pay more than a fair market price – and buyers usually know market value better than sellers,” says Rademeyer.
“The reason is that while sellers may look at a few homes before listing theirs for sale, buyers have frequently looked at dozens of possibilities over a few weeks or months by the time they decide to make an offer - and in the process acquired a finely tuned idea of value as well as a sense of which way the market is tending.”
Meanwhile, he says, sellers who over-price are also sending a message to estate agents that they are unrealistic and will probably be difficult to deal with. The best agents will thus not be keen to have their mandate or to show their homes, because they don’t want to risk their own credibility or sales record.
“The overall result will be a property that attracts no interest - and the only antidote for that is to reduce the asking price as soon as possible and to enlist the help of a qualified and experienced agent to reboot the marketing effort. Those who do not do this and stubbornly decide to stick to their price will, inevitably, end up with an unsold property that is ‘stale’ – or about as attractive to buyers as last week’s bread.”
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